Various high-frequency indicators for May 2025 point towards resilient economic activity in India across the industrial and services sectors amid the elevated global uncertainty, according to the RBI’s monthly economic bulletin released on Wednesday.

Agriculture showed a broad-based increase in production across most major crops during 2024-25. The domestic prices situation remains benign with headline inflation staying below the target for the fourth consecutive month in May, the report states.

It also highlights that financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market.

The report states that the global economy is in a state of flux, reeling from the twin shocks of trade policy uncertainties and a spike in geo-political tensions.

However, on the domestic front, the provisional estimates released in May have reaffirmed India’s growth to be 6.5 per cent in 2024-25, with a significant sequential pickup in Q4. Various high-frequency indicators for May point to signs of resilient economic activity across the industrial and services sector.

In fact, among the countries surveyed for the Purchasing Managers’ Index (PMI), overall expansion in activity was the highest in India with the expansion in new export orders witnessed in May being an outlier, amidst contraction seen in other major economies. Capacity utilisation by manufacturing firms remained above its long-period average.

High-frequency indicators of aggregate demand for May also suggested a pick-up in rural demand, especially given the strong performance of the agricultural sector. Forward-looking surveys of consumer sentiments show stable consumer confidence for the current period and improved optimism about the future. All of these indicate considerable resilience of the Indian economy, notwithstanding the global economic, trade, and geopolitical uncertainties, the RBI bulletin points out.

It also highlights that domestic inflation remains benign with headline inflation remaining below the target for the fourth consecutive month in May. Record domestic crop production in 2024-25 agricultural season is translating into a sharp and sustained easing of food price inflation. Steady core inflation, with indications of some softening after excluding the impact of volatile and elevated gold and silver prices, indicates that underlying inflationary pressures remain muted, according to the report.

It also highlights that equity markets registered modest gains during May-June, notwithstanding fluctuating movements caused by global cues on economic outlook, tariff related news and the evolving domestic scenario. With the flaring up of geopolitical tensions in the Middle East, the equity market registered a brief sharp fall before witnessing a significant rebound on June 20.

The RBI bulletin further states that although credit growth decelerated in April – notably in the agriculture and services sectors – non-bank sources of credit, including external commercial borrowing (ECB) inflows continued to be healthy, although it moderated from March. Overall, financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market.

It also points out that the external sector continued to be robust, with adequate forex reserve cover for imports and external debt.